BILL NUMBER: SB 374	CHAPTERED  10/10/99

	CHAPTER   868
	FILED WITH SECRETARY OF STATE   OCTOBER 10, 1999
	APPROVED BY GOVERNOR   OCTOBER 8, 1999
	PASSED THE SENATE   AUGUST 31, 1999
	PASSED THE ASSEMBLY   AUGUST 26, 1999
	AMENDED IN ASSEMBLY   AUGUST 16, 1999
	AMENDED IN ASSEMBLY   JULY 15, 1999
	AMENDED IN ASSEMBLY   JULY 2, 1999

INTRODUCED BY   Senator Lewis

                        FEBRUARY 11, 1999

   An act to amend Sections 1033, 11535.1, 11537.3, and 11538 of, to
add Section 10489.94 to, and to repeal Section 10509.976 of, the
Insurance Code, relating to insurance.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 374, Lewis.  Insurance claims:  priorities:  life insurers.
   (1) Existing law creates the California Insurance Guarantee
Association and the California Life and Health Insurance Guarantee
Association, which are associations established to insure the
obligations of insurers that become insolvent.  Existing law also
sets forth the priorities for the payment of claims from the assets
of insolvent insurers, including certain claims made by these
associations, but excluding certain categories of claims that are not
covered claims for the purposes of payment by those associations.
   This bill would revise the categories of claims of these
associations that are excluded from priority for payment.  This bill
would also add various other specified claims as eligible for payment
at the end of the priority list, subject to certain conditions.
   (2) Existing law defines "eligible members," for the purposes of
conversion of a mutual life insurer, as those members who are of
record on the insurer's adoption date and on its effective date.
   This bill would delete the reference to the insurer's effective
date.
   (3) Existing law requires the Insurance Commissioner to adopt a
regulation concerning the minimum standards applicable to the
valuation of disability insurance.
   This bill, with respect to life insurance, would authorize the
commissioner to issue a bulletin and adopt regulations to provide
tables of select mortality factors and rules for their use, and
various other rules relative to the valuation of certain life
insurance plans, as specified.
   (4) Existing law, until January 1, 2000, provides for the
regulation of the illustration of life insurance policies in order to
protect consumers and foster consumer education in this regard.
   This bill would delete the January 1, 2000, termination date
applicable to these provisions, thereby extending these provisions
indefinitely.
   (5) Existing law provides that a plan of conversion adopted by a
converting mutual life insurer shall include certain elements
relative to the rights of certain affected parties and interests, as
specified.
   This bill would set forth an alternative plan of conversion that
may be adopted by a converting mutual life insurer.
   (6) Existing law requires the commissioner to examine a plan of
conversion submitted by a mutual life insurer or mutual holding
company and to take certain action with respect to the conversion.
For the conversion of a mutual life insurer, the commissioner may
appoint one or more consultants or legal counsel, as specified, to
advise the commissioner, the costs of which are paid along with other
associated costs by the mutual life insurer.
   This bill would provide that these provisions also apply to the
conversion of a mutual holding company.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 1033 of the Insurance Code is amended to read:

   1033.  (a) Claims allowed in a proceeding under this article shall
be given preference in the following order:
   (1) Expense of administration.
   (2) All claims of the California Insurance Guarantee Association
or the California Life and Health Insurance Guarantee Association,
and associations or entities performing a similar function in other
states, together with claims for refund of unearned premiums and all
claims under insurance and annuity policies or contracts, including
funding agreements, of an insolvent insurer that are not covered
claims.
   The following claims are excluded from this priority:
   (A) Any obligations of the insolvent insurer arising out of any
reinsurance contracts, as well as obligations incurred after the
expiration date of the policy or after the insurance policy has been
replaced by the insured or canceled at the insured's request, or
after the policy has been canceled by the California Insurance
Guarantee Association, the California Life and Health Insurance
Guarantee Association, or another association or entity performing a
similar function in another state.
   (B) Any obligations to insurers, insurance pools, or underwriting
associations, and their claims for contribution, indemnity, or
subrogation, equitable or otherwise, except as otherwise provided in
this chapter.
   (C) Any amount awarded as punitive or exemplary damages, and any
damages in excess of the liability limits of the policies or
contracts that represent damages for contractual bad faith.
   (D) Any amount that is a surplus deposit of a subscriber as
defined in Section 1374.1.
   (E) Any judgments against or obligations or liabilities of the
insolvent insurer otherwise arising from alleged or proven torts, and
any default, collusive, or stipulated judgment against either the
insured or the person subject to proceedings under this article, as
well as any judgment taken in violation of Section 1020.  Nothing in
this subparagraph shall prohibit the commissioner from considering
the underlying claims as a claim entitled to priority under this
section, provided that the claimant shall provide to the commissioner
a written election that the judgment shall in all things be
disregarded in determining the liability for and valuation of the
underlying claim.
   (F) Any loss adjustment expenses, including adjustment fees and
expenses, attorneys' fees and expenses, court costs, interest, bond
premiums, expert witness fees, and other claims of a similar nature
incurred prior to the appointment of a liquidator.
   (G) Claims arising from any self-insured program of the insurer,
including employee life, health and annuity plans, and self-funded
employee benefit plans, however denominated, as well as claims
arising from a multiple employer welfare arrangement as defined in
Section 514 of the federal Employee Retirement Income Security Act of
1974, as amended, a minimum premium group insurance plan, a
stop-loss group insurance plan, or an administrative services-only
plan.
   (H) Any portion of a policy or contract to the extent that it
provides experience rating credits or refunds, dividends, or for the
payment of fees or allowances to any person, including the
policyholder or contractholder, in connection with the service to or
administration of the policy or contract.
   (I) Any annuity issued by a charitable organization for which the
person subject to these proceedings did not have or utilize a
certificate of authority to issue the policy or contract.
   (3) Claims having preference by the laws of the United States.
   (4) Unpaid charges due under the provisions of Section 736.
   (5) Taxes due to the State of California.
   (6) Claims having preference by the laws of this state.
   (7) Claims of creditors not included in paragraphs (1) to (6),
inclusive.
   (8) Certificates of contribution, surplus notes, or similar
obligations, and premium refunds on assessable policies.
   (9) The interests of shareholders or other owners in any residual
value in the estate.
   (b) (1) Every claim allowed under a separate account policy,
contract, or agreement providing, in effect, that the assets
allocated to the separate account are not chargeable with liabilities
arising out of any other business of the insurer, shall be satisfied
out of the assets properly allocated to and maintained in the
separate account, excluding amounts allocated or transferred to the
separate account by the insurer pursuant to subdivision (b) of
Section 10506, equal to the reserves maintained in the separate
account for the policies, contracts, or agreements.  No liabilities
of the insurer arising out of any other business of the insurer shall
be satisfied from assets properly allocated to and maintained in a
separate account except (A) from amounts allocated or transferred to
the separate account pursuant to subdivision (b) of Section 10506 and
(B) from any assets allocated to the separate account that exceed
the reserves under the separate account policies, contracts, or
agreements.  For the purposes of this subdivision, "separate account
policies, contracts, or agreements" means any policies, contracts, or
agreements that provide for separate accounts as contemplated by
Section 10506, 10506.3, 10506.4, or 10541.  Any valid and allowed
claim for contractual benefits that cannot be satisfied out of the
assets properly allocated to and maintained in a separate account for
obligations authorized by subdivision (a) of Section 10506.3 shall
be included as a claim against the general account within paragraph
(2) of subdivision (a).  Any valid and allowed claim against the
general account for contractual benefits under an obligation
authorized by Section 10506.4 shall be included as a claim within
paragraph (2) of subdivision (a).
   (2) Notwithstanding any other provision of law, to the extent that
any assets of a life insurer, other than those assets properly
allocated to, and maintained in, a separate account, have been used
to fund or pay any expenses, taxes, or policyholder benefits that are
attributable to a separate account policy, contract, or agreement
that should have been paid by a separate account prior to the
commencement of delinquency proceedings, then upon the commencement
of delinquency proceedings, the separate accounts that benefited from
this payment or funding shall first be used to repay or reimburse
the company's general assets or account for any unreimbursed net sums
due at the commencement of delinquency proceedings prior to the
application of the separate account assets to the satisfaction of
liabilities of the corresponding separate account policies,
contracts, and agreements.
   (c) Upon the issuance of an order appointing a conservator or
liquidator for any person under either Section 1011 or 1016 or both
these sections, the lien of taxes due to the State of California
imposed by Article 4 (commencing with Section 12491) of Chapter 4 of
Part 7 of Division 2 of the Revenue and Taxation Code shall become
subordinate to the reasonable administrative expenses of the
proceeding under the order.
   (d) The following definitions are for purposes of this section
only and shall not be used to determine coverage under the California
Life and Health Insurance Guarantee Association Act (Article 14.7
(commencing with Section 1067)):
   (1) "Funding agreements" means those agreements authorized to be
delivered or issued pursuant to Section 10541.
   (2) "Annuity" means only those annuity contracts, including
period-certain annuities issued by a life insurer, that require for
their lawful issuance a certificate of authority from the
commissioner, and excludes without limitation all instruments for
which the commissioner's certificate of authority is not required,
such as promissory notes, installment loans, negotiable instruments,
mortgages, and debentures.
   (3) Reinsurance contracts shall not be included as insurance or
annuity policies or contracts, or funding agreements.  However, any
insurance or annuity policy or contract, including any funding
agreement, that is assumed by an insurer under an assumption
reinsurance agreement pursuant to a plan of liquidation,
rehabilitation, or reorganization shall, unless the plan provided
otherwise, be deemed to retain the issue date of the original
insurance or annuity policy or contract, or funding agreement that is
assumed.
   (e) The provisions of this section are severable.  If any portion
of this section is held invalid or is preempted by federal law, the
remainder of the section and its application shall not be affected.
Specifically, should any of paragraphs (1) to (6), inclusive, of
subdivision (a) be held to be invalid or preempted by federal law,
the claims included within the invalid paragraph shall be included
within paragraph (7) of subdivision (a), and the remaining paragraphs
shall not be affected thereby.
   (f) No payment shall be made to any creditor in paragraphs (8) or
(9) of subdivision (a), unless all claims in paragraphs (3) to (7),
inclusive, of subdivision (a) have been paid in full, together with
interest at the legal rate of the date of the order commencing the
proceeding or the date on which the claim became liquidated,
whichever date is later.  In proceedings involving life insurance
companies, no payment shall be made for any claim in paragraph (7),
(8), or (9) of subdivision (a) unless and until all claims in
paragraph (1) of subdivision (a) have been paid in full, together
with interest at the legal rate, all claims in paragraph (2) of
subdivision (a) have been paid the full value of the policy or
contract upon which the claim is based, as of the time of
distribution to claimants, and all claims in paragraphs (3) to (6),
inclusive, of subdivision (a) have been paid in full, together with
interest at the legal rate from the date of the order commencing the
proceeding.  Notwithstanding the provisions of this subdivision, no
payment of interest shall be made to any insurance guaranty
association that receives early access disbursements from the estate
pursuant to Section 1035.5.
  SEC. 2.  Section 11535.1 of the Insurance Code is amended to read:

   11535.1.  The definitions in this section apply to the following
terms when used in this chapter.
   (a) "Adoption date" means the date the board of directors adopts
the plan of conversion.
   (b) "Converted company" means the converted insurer or converted
mutual holding company, as the case may be.
   (c) "Converted insurer" means the incorporated stock insurer into
which a mutual insurer has been converted or merged or redomiciled in
accordance with the provisions of this chapter.
   (d) "Converted mutual holding company" means the stock corporation
into which a mutual holding company has been converted in accordance
with this chapter.
   (e) "Converting mutual life company" means, for a plan of
conversion under this chapter, the mutual life insurer or mutual
holding company that is converting under such a plan.
   (f) "Effective date" means, for the conversion of a mutual life
insurer, the date upon which the conversion of the mutual life
insurer is effective, as specified in the commissioner's amendment to
the mutual life insurer's certificate of authority issued in
accordance with Section 11542, as a result of conversion proceedings
under this chapter.  For the conversion of a mutual holding company,
"effective date" means the date upon which the conversion of a mutual
holding company is effective, as specified in the amended articles
of incorporation of the mutual holding company filed with the
Secretary of State in accordance with Section 11542, as a result of
conversion proceedings under this chapter.
   (g) "Eligible members" means, for the conversion of a mutual life
insurer, the members of the mutual life insurer who are of record on
the mutual life insurer's adoption date.  For the conversion of a
mutual holding company, "eligible members" means the members of the
mutual holding company who are of record on the mutual holding
company's adoption date.
   (h) "Member" means a person who, by the records of the mutual
company and by its articles of incorporation or bylaws, is deemed to
be a holder of a membership interest in the mutual company.  For a
mutual life insurer, a plan of conversion may provide that the term
"member" also includes a person who is the owner of a policy issued
or assumed by an insurer, that, pursuant to court order, is to be
merged into the converted company.  On and after the effective date
of a plan of conversion that creates a mutual holding company, the
term "member" means a member of a mutual holding company, as provided
in Section 11542.1.
   (i) "Membership interests" means the interests of members arising
under this code and the articles of incorporation and bylaws of the
mutual company or otherwise by law.  Membership interests include the
right to vote for directors of the mutual company and the right to
vote on any plan of merger, consolidation, reinsurance, or transfer
of assets and liabilities of the mutual company.  Membership
interests do not include members' rights in surplus, if any.
   (j) "Mutual company" means, in the case of a plan of conversion,
the mutual life insurer, mutual property-casualty insurer, or mutual
holding company that is converting pursuant to such plan.
   (k) "Mutual holding company" means a corporation organized under
the laws of this state subject to the General Corporation Law as set
forth in the Corporations Code.  The articles of incorporation of a
mutual holding company shall contain provisions stating the
following:
   (1) It is a mutual holding company organized under this chapter.
   (2) One purpose of the mutual holding company is to hold not less
than 51 percent of the voting stock of a stock holding company, which
in turn holds all of the voting stock of a converted life insurer.
   (3) It is not authorized to issue voting stock.
   (4) Its members have the rights specified in Section 11542.1 and
in its articles of incorporation and bylaws.
   (5) Its assets and liabilities are subject to inclusion in the
estate of the converted insurer in any proceedings successfully
prosecuted against the converted insurer under Article 14 (commencing
with Section 1010) or Article 14.3 (commencing with Section 1064.1)
of Chapter 1 of Part 2 of Division 1.
   (l) "Mutual insurer" means, in the case of a plan of conversion
under this chapter, the mutual life insurer or mutual
property-casualty insurer that is converting pursuant to such plan.
   (m) "Mutual life insurer" means a domestic incorporated mutual
life insurer, or domestic mutual life and disability insurer, that
issues nonassessable policies on a reserve basis.
   (n) "Person" means an individual, partnership, firm, association,
corporation, joint-stock company, limited liability company, trust,
government or governmental agency, state or political subdivision of
a state, public or private corporation, board, association, estate,
trustee, or fiduciary, or any similar entity.
   (o) "Plan of conversion" or "plan" means a plan adopted by a
mutual company in compliance with this chapter.
   (p) "Policy" means an individual or group policy of insurance
issued by a life insurer.  If a policy of a mutual life insurer takes
a form other than an individual form but holders of certificates or
other interests under the policy are treated by the mutual life
insurer as if they were holders of individual policies, the mutual
life insurer may provide in its plan of conversion under this chapter
that such a certificate or other interest is deemed to be a policy
and deem the holder of the certificate or other interest to be an
owner of a policy.  Such a provision shall be for the sole purpose of
determining the rights, if any, of policyholders of the mutual life
insurer to vote upon and receive consideration under the plan of
conversion and may not affect the other voting rights and
qualifications of members of the mutual life insurer.
   (q) "Policyholder" means the holder of a policy other than a
reinsurance contract.
   (r) "Rights in surplus," for a mutual life insurer, means rights
of members of the insurer to a return of that portion of the surplus
that has not been apportioned or declared by the board of directors
for policyholder dividends.  "Rights in surplus" includes rights of
members of the insurer to a distribution of surplus in liquidation or
conservation of the insurer under this code, or in a dissolution or
winding up.  "Rights in surplus," for a mutual holding company, means
rights of members of the company to a return of any surplus that has
not been apportioned or declared by its board of directors for
member dividends.  "Rights in surplus" includes rights of members of
the mutual holding company to a distribution of surplus in
liquidation or conservation of the insurer under this code, or in a
dissolution or winding up.  "Rights in surplus" does not include any
right expressly conferred solely by the terms of an insurance policy.

   (s) "Stock holding company" means a corporation authorized to
issue one or more classes of capital stock, the corporate purposes of
which include holding all of the voting stock in an insurer that has
been converted from a mutual life insurer to a stock life insurer in
proceedings under Section 11537.2 in which a mutual holding company
is formed.
   (t) "Voting stock" means securities of any class or any ownership
interest having voting power for the election of directors, trustees,
or management of a person, other than securities having voting power
only because of the occurrence of a contingency.  All references to
a specified percentage of voting stock of any person mean securities
having the specified percentage of the voting power in that person
for the election of directors, trustees, or management of that
person, other than securities having voting power only because of the
occurrence of a contingency.
  SEC. 3.  Section 10489.94 is added to the Insurance Code, to read:

   10489.94.  (a) The Commissioner may issue a bulletin to provide
tables of select mortality factors and rules for their use, rules
concerning a minimum standard for the valuation of plans with
nonlevel premiums of benefits, and rules concerning a minimum
standard for the valuation of plans with secondary guarantees.  The
bulletin authorized by this subdivision shall have the same force and
effect, and may be enforced by the commissioner to the same extent
and degree, as regulations issued by the commissioner.  The
commissioner shall adopt regulations that shall supersede the
bulletin authorized by this section no later than December 31, 2002.

   (b) It is the intent of the Legislature that the bulletin
described in subdivision (a) and the superseding regulations shall
contain the provisions of the National Association of Insurance
Commissioners Valuation of Life Insurance Model Regulation Number 830
as adopted in March of 1999.
  SEC. 4.  Section 10509.976 of the Insurance Code is repealed.
  SEC. 5.  Section 11537.3 of the Insurance Code is amended to read:

   11537.3.  A plan of conversion adopted by a converting mutual life
company shall include the following:
   (a) (1) The plan provides that each member's membership interests
and rights in surplus are extinguished and each eligible member will
receive, without payment, nontransferable subscription rights to
purchase a portion of the capital stock of a corporation which will
issue the subscription rights, or, in lieu thereof, shares of capital
stock or other securities of the issuer, cash, premium credits, or
credits to policy account values having an aggregate value equal to
the aggregate exercise price of the subscription rights that
otherwise would have been allocated to the member.  The issuer is
either (A) the converted insurer, (B) a corporation, the voting stock
of which is owned by the mutual life insurer or the mutual holding
company, as the case may be, or by any other persons, that will
acquire in the conversion all the voting stock of the converted
insurer, or (C) a corporation, all of the voting stock of which is
owned by the mutual holding company into which both the mutual
holding company and the stock holding company will be merged.
   (2) The subscription rights are allocated in whole shares among
the eligible members.  The subscription rights, capital stock, cash,
premium credits, and credits to policy account values are allocated
among the eligible members using a fair and equitable formula.  This
formula will either (A) allocate a fixed component per capita among
eligible members (specifying how joint owners will be treated for
this purpose) and allocate a variable component among eligible
members in proportion to the cash value of policies held by them, or
(B) allocate the subscription rights, capital stock, cash, or credits
in any other manner that the commissioner may approve.
   (b) The plan specifies or authorizes the board of directors of the
converting mutual life company to set the expiration date of the
subscription rights, if any, allocated by the plan.  The exercise
price per share of the subscription rights is 50 percent of the price
per share at which the capital stock of the issuer is first offered
to the public in the offering referred to in subdivision (d), as
fixed at the time of the offering by the boards of directors of the
converting mutual life company and the issuer or committees of the
boards.
   (c) The plan provides that any eligible member not exercising the
subscription rights, if any, allocated to the member will instead
receive alternative forms of consideration having an aggregate value
equal to the aggregate exercise price of the subscription rights
allocated to the member. The alternative forms of consideration may
include shares of capital stock of the issuer, cash, premium credits,
or credits to policy account values.  The choices available to the
eligible member shall be specified in the plan.  The choices
available may take into account the type of policy, size of policy,
tax status of the member, and other factors that the commissioner
determines are appropriate.
   (d) The plan provides that the issuer will make a public offering
of its capital stock at a price determined by the boards of directors
of the converting mutual life company and the issuer.  The number of
shares to be offered is determined according to the plan and may
include any shares issuable upon exercise of subscription rights that
are not exercised.  The plan may also provide for the issue and sale
of securities of the issuer to other persons at the time of the
public offering.  However, any plan provisions pertaining to the
issuance and sale of securities to the insurer's officers, directors,
employees, agents, and employee benefit plans for their benefit
shall be subject to Section 11540.
   (e) The plan of a mutual life insurer may provide for the
establishment, for policyholder dividend purposes only, of a closed
block.  The closed block will consist of all of the participating
individual policies of life insurance of the mutual life insurer in
force on the effective date of the plan for which the insurer had an
experience-based dividend scale payable in the year in which the plan
is adopted.  Assets of the insurer shall be allocated to the closed
block in an amount that produces cash-flows, together with
anticipated revenues from the closed block business, expected to be
sufficient (1) to support the closed block business, including
payment of claims and those expenses and taxes specified in the plan
and (2) to provide for continuation of dividend scales in effect on
the adoption date if the experience underlying the scales continues,
and for appropriate adjustments in the scales if the experience
changes.  The plan may provide for conditions under which the
converted insurer may cease to maintain the closed block and its
allocated assets.  Regardless of such a cessation, the obligation
under the policies constituting the closed block business remain the
obligations of the converted insurer.  Dividends on those policies
shall be apportioned by the board of directors of the converted
insurer in accordance with the terms of the policies.
   (f) In lieu of the provisions contemplated by subdivisions (a) to
(d), inclusive, a plan may be adopted by a converting mutual life
company that:
   (1) Is fair and equitable to the members of the converting mutual
life company and provides for consideration to the members having a
value equal to or greater than the value of the consideration that
would have been payable to the members pursuant to a plan of
conversion contemplated by subdivisions (a) to (d), inclusive.
   (2) Has been approved by a resolution of the majority of the board
of directors that specifies the basis on which the board of
directors of the converting mutual life company finds that adopting
the plan of conversion under this subdivision meets the requirements
of paragraph (1).
   (3) Provides that each member's membership interests and rights in
surplus are extinguished and each eligible member will receive,
without payment by the member, consideration that is allocated among
the eligible members using a fair and equitable formula.  This
formula will either (A) allocate a fixed component per capita among
eligible members, specifying how joint owners will be treated for
this purpose, and allocate a variable component among eligible
members in proportion to the cash value of policies held by them, or
(B) allocate the consideration in any other manner that the
commissioner may approve.
   (4) Provides that eligible members may receive one or more kinds
of consideration, including shares of capital stock of the converting
mutual life company or shares of capital stock (or interests in
shares of capital stock) of a corporation that, after the conversion,
directly or indirectly, controls the converted insurer, cash,
premium credits, or credits to pay policy account values, as set
forth in the plan.
   (5) Provides for either of the following:
   (A) The conversion of the converting mutual life company into a
domestic stock corporation.
   (B) The conversion of the converting mutual life company by means
of a merger (i) in the case of a mutual life insurer into a domestic
stock corporation, provided the corporation has been issued a
certificate of authority, or (ii) in the case of a converting mutual
holding company into a domestic or foreign stock corporation, and, in
the case of that merger:
   (I) The merger and conversion shall be subject to the provisions
of this chapter other than subdivisions (a) to (d), inclusive.
                                                             (II)
Chapter 11 (commencing with Section 1100), Chapter 12 (commencing
with Section 1200), and Chapter 13 (commencing with Section 1300), of
Division 1 of the Corporations Code shall not apply to the
converting mutual life company in the merger except that Section 1107
of the Corporations Code shall apply.
   (III) The merger and conversion shall become effective upon the
filing of appropriate instruments with the Secretary of State.
   (6) The plan may also provide for the converted company, or a
corporation that will directly or indirectly control the converted
insurer after the conversion, to issue and sell its securities to
other persons at the time of the conversion.  Any plan provisions
pertaining to the issuance and sale of securities to the insurer's
officers, directors, employees, agents, and employee benefit plans
for their benefit shall be subject to Section 11540.
  SEC. 6.  Section 11538 of the Insurance Code is amended to read:
   11538.  (a) The commissioner shall examine the plan submitted
pursuant to subdivision (b) of Section 11536.  As a part of the
examination the commissioner may order a hearing on the plan after
written notice of the hearing to the mutual company, and its members,
all of whom shall have the right to appear at the hearing.  The
commissioner may require as a condition of consent that the mutual
company make modifications of the proposed plan that the commissioner
finds necessary for the protection of policyholders.  The
commissioner shall consent to the plan if he or she finds all of the
following:
   (1) For the conversion of a mutual insurer, the plan is fair and
equitable to the insurer and its policyholders.
   (2) For the conversion of a mutual holding company, the plan is
fair and equitable to the company, its members, and the policyholders
of the converted insurer.
   (3) The plan does not violate the law.
   (4) The converted insurer will, after the conversion, satisfy the
requirements for the issuance of a license to write the line or lines
of insurance for which it is presently licensed.
   (b) For the conversion of a converting mutual life company, the
commissioner may appoint one or more actuarial, financial, or other
consultants, including legal counsel, as the commissioner finds
necessary to advise the commissioner in making the determination of
whether the proposed plan of conversion meets the applicable
requirements of this chapter.  The converting mutual life company is
responsible for the reasonable fees and expenses of any actuarial,
financial, or other consultants, including legal counsel, appointed,
and for the mailing and publication of notices to the mutual company
and its members.
